Category: Economy
India needs Free Internet
More than any other country on this planet, I would say that India needs free access to the internet to help it leapfrog to the next stage of its already large economy (the Indian GDP just surpassed that of the U.K.). In order to sustain its economic growth, remove system inefficiencies, open up new opportunities for entrepreneurs and alleviate poverty levels, India needs to subsidize access to the internet for citizens earning less than USD 10 per day.
That figure is a mind-boggling 500M people in my estimate, mostly based in rural towns, and villages. Even large cities have huge populations of people with no access to electricity, or even potable water. Given this situation, is it not laughable that I am suggesting internet as a free (or almost free) utility for the people to use ?
No, it is not a matter to be sniffed at. Given that tablets are now available at less than USD 50 (though not great looking), access to the internet utility becomes the major constraint for those masses of people who are at the fringe of the Indian economy which is still slated to grow @ 7.5% or more this year. The key enabler for these people is going to be knowledge and application of knowledge to their vocations and school learning. And, how is India going to deliver knowledge and actionable learning to the masses when its educational infrastructure is so weak ? How is India going to develop its intellectual capabilities beyond the IITs ? There are many questions but it is unquestionable that people provided with opportunities at the right times in their lives make it to a successful life later in their lives. Opportunity is critical and the Indian economy would not be in a position to deliver opportunities to the roughly 10M people coming into its workforce every year, most of them waiting for a job. That is close to 1M people every month!
Facebook and Google are opening up the airwaves in India by offering WiFi access in railway stations and other public places. While their goals are not entirely philanthropic, such initiatives by private corporations have to be commended when the national resources are tight to deploy access throughout the rural areas of India. I believe that India stands to benefit in a huge manner when all its villages and rural population are connected via satellite-based internet. Already 400M Indians are connected to the internet via their mobile phones.
India is not only a huge consumer market which is becoming more knowledgeable about the products the people wish to consume. It is also a melting pot for all kinds of experimentation that companies would like to pursue in the interest of testing their offerings. India is also an entrepreneurial nation of youngsters rushing to launch their new ideas or adaptation of ideas which have worked elsewhere. Given that the government is pushing the idea of a “Digital India”, it is not surprising that the population is warming up quickly towards the concept of all time and real time connectivity to test ideas, consume products, evaluate anything and everything. This is nothing short of a revolution in the making.
The good thing about India is that there is space for everyone. With its English-speaking workforce and modern orientation, India will become the third largest economy of the world by 2030, if not by 2025. It is critical that India offers opportunities to its aspiring people via the concept of free internet. Such an offering can even be positioned as free for 3 years, followed by USD 1 per month thereafter, for segments of the population which has an annual per capita income of USD 2,000 or less. For people earning above this figure upto a cap of USD 5,000 per capita, the rate could be fixed at USD 3 per month. People outside this cap would have to pay the commercial price. Such a subsidy scheme would go a long way in facilitating internet access to the teeming millions of Indians, transforming the country towards a Digital India.
I do hope this happens for the benefit of all Indians.
Cheers,
Vijay Srinivasan
11th June 2017
A negative vote today in French Elections
Will France follow Donald Trump’s unexpected victory in the U.S. Presidential Elections and the Brexit philosophy endorsed by millions of British voters to get Britain out of the European Union (EU)? Will the French voters elect an untested nationalist, against a well-established urbanite with a global outlook?
How France decides today in its Presidential Elections (7th May Sunday) will have far-reaching ramifications around Europe and the world. It will determine if the EU survives as a political and economic entity.
While I have no personal views on the French Elections, I am debating if young, disillusioned French voters will swing in favour of Marine Le Pen, against Emmanuel Macron. If that swing happens in a wild fashion, it is not inconceivable for Le Pen to claim the French Presidency and that would turn Europe upside down. Le Pen is against all established norms in French and European society – against trade, against immigration, against globalization.
In the U.S. Presidential Elections, I bet against Hillary Clinton and won my bet. I thought that she did not really appeal vigorously to the male, white, Christian, rural base of the middle America – and she didn’t, apart from all the other issues which plagued her campaign (like the email server problem, et al). I was not entirely in favour of Donald Trump, but then there was no other credible alternative, and he easily won the elections against Hillary Clinton, though he missed out on the popular vote count.
Can something like that happen in the French Elections?
Why not? A negative vote is entirely possible.
France is in a crisis. Its political and societal divides have engulfed its core to such an extent that radical outcomes cannot be thrown out of the door. France is under attack by immigrant extremism, or terrorism. Economy is in a turmoil and youth unemployment is rising. France has so many problems today that a traditional, globalized, suave and urban President will not get far into his presidency. Macron could prove himself otherwise, but it is highly unlikely he can fix France’s problems, as he does not have enough political and economic management experience. If he fails in his first year as President, it is almost a given that Le Pen’s supporters will revolt and her base will increase dramatically. And, let us not forget that Macron does not even have any party’s support – in fact, he has no party! Yes, he is coming on the strength of a people movement, not a political party!!
Can Le Pen fix the problems of France?
Even less likely than Macron. Her party has always been on the fringes, and most people are shocked she made it to the final leg of the Presidential Elections. She has no experience managing a large country or economy. She would need a lot of management help if she ever gets close to the seat at the Elysee Palace.
So, in a nutshell, it is going to be a huge challenge for France. May be Macron will win as he has a 25 point lead over Le Pen, but then one never knows. But France has to blame itself for any fiasco, as both candidates have never held elected posts and have hardly got any experience, and may not win parliamentary elections scheduled for June this year. How can this happen? How will a President govern without the support of the French Parliament?
All this points to a hugely challenging time for the French people.
The implications for Europe and the larger world community are huge.
Watch the news today and tomorrow closely to see how France votes for its President.
Cheers,
Vijay Srinivasan
7th May 2017
Anti-Elitism and De-globalization
The world is rising against elitism, which is just another word for “learned segmentation”. It means that elitists are rather segmented folks – like a specific group of well-to-do people, a set of people who do certain things with a unique taste, a group of alumni from prestigeous institutions, a bunch of guys who drive Ferraris, a group of ultra-orthodox religious folks, a caste group (in the Indian context), and generally a bunch of well off folks who do similar things and think almost in the same manner, to the exclusion of almost all other people.
Personally, I have tried to stay away from any group with a label stuck on it. I exited the IIM-B Alumni activities as my socialist leanings are not compatible with an entrepreneurial or corporate money bags kind of people, though they may be my class mates. I have rarely seen any one of them doing charity, or engaging in philanthropic work for the downtrodden. They may well wish to do so, but evidence is limited. I even avoid brands – I don’t want to be seen driving a Mercedes or BMW or Audi; I do not wish to have a Rolex watch; and so on and so forth. I was without a Mont Blanc pen for a long, long time and could not say no when my children decided to gift one for my last birthday. When I am seen on the road, I just want to be a normal guy with no accessories which could define me in some way or the other.
The reason why young people are rising against elitism is the strong perception that they have about the relationship which exists between elitism and wealth, almost in an unholy manner, which in turn leads to inequalities in income. Wealth generates more wealth and income for the elitists or the rich folks. Others are excluded, and the exclusion is almost surreal. Things go on as though nothing has changed, everything is hunky dory. People who make obscene money on Wall Street continue to make that money year after year. Similar groupism and exclusions can be cited in almost every scenario. The insidious reach of money and networking power has to be seen to be believed.
One can argue about the merits of meritocracy in this context. I refute strongly the link and the necessity for any society or government to promote meritocracy at the cost of the rest of the society at large. What about the 95% of the people who cannot make it into that “special” list of people who will keep getting promotions and scholarships? In a nutshell, why would the special people be any different from their predecessors? They belong to a particular school, university, way of thinking, family, et al. That does not mean the rest of the people are stupid, or below average, or even average. There is this argument that societies and institutions prosper because a set of meritocrats has been handpicked to manage them and deliver results that are expected. While in a limited set of circumstances this may be true, in the larger context a social mix would provide better stability and sustainability with deeper understanding of societal issues and challenges.
I have not seen a huge difference between people with prestigeous MBAs and non-MBAs in the corporate context. There is only one difference – there is more structured thinking when you have some MBAs around you, and less of that when you have staff without MBAs. Apart from that, outcomes are not particularly impacted because MBAs are driving the businesses or even governments.
So, let us come now to the issue of “de-globalization”. Is there a relationship between “anti-elitism” and “de-globalization”? What do you think?
I believe that the movement against globalization has to be seen in the context of social elitism which predicates that globalization is the way to go for the world as a whole, since societies, countries and organizations can work together to produce better than average results for their combined economies. As a social theory, it is fantastic with an altruistic bent to it, no doubt. However, as a practical application of an interesting theory, it comes short as the results have been less than spectacular. The idea is not “win-win” but rather “win-some win for some time-lose-lose ultimately”. This means that not all sides are winners in a globalization effort. In the outsourcing example, India and the Philippines can be winners to a large extent, the U.S. and the U.K. are initially winners from a corporate cost-slashing perspective, but later become losers when the enhanced business competitiveness cannot continue at the cost of increasing job losses for locals.
The argument that outsourcers make the U.S. businesses more competitive does not hold water for the long term (it is fine in the medium term), as competitiveness in this context refers just to increased business profits. Competitiveness in terms of enhanced proficiency can also be obtained by training the locals to a large extent. Let us not forget the increased business profits come because of lower wages paid to foreigners as compared to the locals.
The liberal thinking is that globalization is great for increasing the volume of trade, and as more nations trade goods and service, eventually the world will become one homogeneous market. Great idea, no doubt. But it is naive and misses out on key economic fundamentals – that average per capita income across supplying and consuming countries need to be similar in order to enjoy true globalization. When India has a per capita income of USD 3,000 (on a PPP basis), and China has USD 8,000, the difference is huge between these two nations and the developed countries which have upwards of USD 40,000 per capita. So, a job loss in a developed country is going to have a major impact in its society.
For the elitists, it is okay – as they are perched on the top anyway. Armchair theorists won’t do anymore given the disarray in the developed countries. Fresh thinking is needed. The answer is not coming from anti-elitists only, but governments and economists have to think harder in terms of sustainable solutions.
Is it any wonder that social democrats such as Bernie Sanders enjoy rock star status? It is easy to jump into a movement and start shouting at the top of your voice, but harder to derive economic solutions which will stand the scrutiny of society. Anti-elitism and de-globalization are not new fads or book topics, but social forces which would make policy makers think deep and in a totally new way.
Cheers,
Vijay Srinivasan
19th February 2017
Welcome 2017
2017 promises to offer non-stop entertainment from a geo-political perspective. I believe it will be a great year with new surprises being sprung upon a rather unsuspecting (is that correct anymore?) proletariat almost every other week. Fabulous, to say the least. All over the world, people are probably gearing up for revolutionary thinking and changes in political and social ideologies, don’t you think so?
Unless you have lived in Mars for the past few months, you will tend to believe what I am saying now – the world is being turned topsy turvy and most people who matter (meaning those who are less than 30 years of age) are cheering, they may not have assessed the outcomes carefully however!!!
2017 brings along a variety of new topics to the table – whether that table is at whichever country around the world, these topics are going to matter. The foremost topic will be the demeanour and behaviour of the new President of the United States, arguably the most important country in the world (China begs to differ, however!). President Donald Trump is already shaking up (though he is only a “President-Elect” as of now) established norms of diplomacy and economic fundamentals, and as usual, is using his Twitter account to deliver policy prescriptions and comments on world affairs and the people that he either likes or dislikes.
The other major thing in world politics and economics is Britain’s Brexit phenomenon, which is shaking up the European Union (EU). British Citizens voted to get out of the EU, but still would like to retain some major benefits of staying in the Union. The British Government is going around saying that it would win major concessions from the EU, which are not going to be granted given the dismay that the other major countries have over Britain’s exit from the EU.
Of course, European coverage will be deficit if we do not mention the aspirations of Vladimir Putin, the President of Russia, who retained his title as the “mover and shaker” of geo-politics. He grabbed Crimea, ensured the defeat of the rebels opposed to President Assad of Syria, and allegedly helped Donald Trump win the U.S. Presidential Elections (according to the CIA and the FBI, as well as President Obama) by hacking and leaking out thousands of emails and documents detrimental to the Democratic Party of the U.S. Who can beat that record?
On the Asian side of world affairs, we would be remiss if we do not mention the North Korean exploits with launching missiles and threatening to explode yet another atomic device very soon. Kim Jong Un is excellent in annoying even his best supporter, which happens to be China. Since he is totally unpredictable, one can only wonder what he has in store for the New Year (should we send him an e-greeting at least?). He does not like any other country in the world, especially the U.S., South Korea and Japan, and is going to continue pushing the limit of intolerable behaviour.
That brings us finally to China, which has proved to be a conundrum as it is struggling to emerge as a well-accepted global military and economic power, much like the U.S. But, China is failing miserably in its efforts to do so. It is doing all the wrong things on its way to super power and market economy status. China needs to understand that people around the world do not care about hard power anymore. The U.S. and Russia have been the world’s super powers for the past six decades, and that is not going to change much in the coming decade. China needs to work on developing its soft power and project its influence in a positive manner around the world, instead of threatening every nation around the South China Sea, moving military equipment and missiles to disputed reefs, and illegally enter the exclusive economic zones of the maritime countries around in the guise of its claim over the sovereignty of the South China Sea. It is losing its image on the world scene.
Nevertheless, the global citizens can enjoy the antics ot the President of the Philippines, who has kept the global media entertained over the past six months or so. He is no friend of the U.S. or the UN. His people seem to like him, and that’s all he cares about – a very unique character who appears to have no respect for justice or rule of law. But then, what can ASEAN countries do? Nothing whatsoever.
Given the situation around the world, the one country which seems to be going about doing its business purposefully is India, right? The Prime Minister of India has gone after black money and corruption in a big way what with his demonetization of large currency notes which was a very brave move. The rural population have suffered heavily over the past seven weeks due to lack of cash, as rural India is largely a cash-based economy. Corruption is still prevalent in most places in India (can you register a property in India without such help?), and it will now shift to the new currency notes. It has been a tough time for over a billion Indian citizens in India, but the Prime Minister thinks that this could be a great way to move India to a digital economy with cashless transactions driving it. Great idea but infrastructure is simply not there to ensure a cashless economy does indeed come into operation in short order – it is going to take at least two to three years before things work out in the way the Prime Minister has envisioned.
No shortage of entertainment, right? There are many other things happening around the world, and one has to just keep in touch with the fast moving media coverage. I hope you are all doing that.
In the meanwhile, here’s Wishing all of you and your families a Wonderful New Year ahead in 2017.
Take care,
Cheers,
Vijay Srinivasan
1st January 2017
The “Magical” Kingdom
I was taking a walk along the MacRitchie reservoir this evening along with my wife, as part of my weekend walking exercise regimen.
While discussing about the global economy in general and Singapore economic situation in particular, my wife mentioned that it is highly likely that the U.S. Federal Reserve would increase its interest rates 2 to 3 times next year. Given the recent increase of 0.25%, this might lead to somewhere around 1.0% in total over the next 12 months or so. The stock markets have taken a hit around the world as a result of the U.S. Fed rate increase earlier this week.
Given the growing strength of the U.S. Dollar, the drop in the price of Gold, the increase in the price of Oil, etc., it is apparent that the global economy is headed for more shakeups than ever in the coming 12 months. Combined with the uncertainty of the Trump Presidency, all this adds to the growing concern in Asia of the future of the world economy. Currencies in Asia are taking a major hit, the SGD has dropped to 1.44 to the USD already and is projected to hit 1.50 by the end of calendar 2017.
I made a remark to my wife that the Singapore economy is going to face major headwinds as a result of these developments, and the real estate will be a big loser. There will be auctions and loan foreclosures looming in the coming months and a drop in real estate values which will be a boon to folks waiting to buy an apartment (Singapore real estate is one of the priciest in all of Asia, second only to Hong Kong). Interest rates are set to climb up after a long sojourn of very low rates. Rental values have already been dropping over the past couple of years and recently took a further downturn. Given that the Government has been quite tight on employment passes, the demand is dropping from foreign population.
So, my conclusion was that the “magical” economic kingdom of Singapore is all set to take economic knocks in the next 12 months after significant performances over the past several years. The real estate had doubled between 2009 and 2013 and remained more or less at those inflated prices over the past 3 years (with minor drops of 5 to 10%). This obviously cannot continue for ever and finally the situation is all set to change for the worse for home owners who are planning to sell. The buyers are going to sit tight, despite some annual increases in the takeup rate of apartments.
However, Singapore has always found a way out of economic challenges due to the firm guidance provided by the Government. While real estate market prices are something that the Government does not directly control, it has put in place some innovative policy mechanisms to curtail speculation and these seem to have, at least partially, worked.
So, if I were a home buyer, I am rather inclined to wait out for the next 6 to 9 months, see some interest rate increase, some significant price drops, some wait and watch games, before actually seeking out bargains. On the national economic fronts, there are going to be some big pains for the next couple of years before recovery can be made. The U.S. economy is bound to make gains, while the China economy is expected to decelerate. Singapore economy is highly vulnerable to external shocks due to its openness.
See – how much a walk around a reservoir (lake) can generate in terms of economic and real estate discussions! I enjoy such “active” walks which help to accomplish some brisk physical walking combined with energetic discussions with the most important person in one’s life – your spouse!!
Enjoy your walks with your spouse and talk economics, health, household matters, and what not. These are very important for relationships as well.
Cheers,
Vijay Srinivasan
17th December 2016
The new Protectionism
With the impending arrival of Donald Trump as President of the U.S. at the White House, the major trading nations of the world are worried. First of all, they never expected him to win, and apparently had not drawn up contingency plans. They probably thought they could manage a Hillary Clinton presidency, as she was a supporter of the status quo, though she turned against the Trans Pacific Partnership (TPP) trade deal propounded aggressively by President Obama during later part of her election campaign.
Trade is like immigration – it evokes passionate arguments for and against trade globalization. The WTO (World Trade Organization) looms large on any global trade issue, but it has had a variety of ups and downs while trying to conclude a global trade deal, with stringent opposition from developing countries. Those arguments against globalization have now died down, but a new President at the White House could resurrect th ghosts of global trade agreements, by walking out of multilateral trade agreements. President-Elect Trump has clearly stated that he will revoke the NAFTA trade deal of the Nineties, or at least re-examine it vigorously. The TPP trade deal is surely dead by now, as Trump will not let that agreement even go to the U.S. Congress. And, a Congress dominated by Republicans is in no mood for new trade deals, which it thinks are against the interest of middle class Americans.
While we can recite the virtues of globalization ad infinitum, it is critical to understand the rise of anti-trade, anti-globalization sentiments both in the U.S. and the U.K. (and increasingly, in most of Western Europe). Why did we not predict this phenomenon ahead of current times?
Well, the sentiments were always there, but increasing job losses in the U.S. specifically and stagnant wages have incited Middle Class America to revolt in a democratic manner – they simply decided to reject the status quo politics of Washington, and bring a stark outsider to run the country. Trump is no politician, he was not even in the running. He is a businessman focused on making profits for himself and his family. How will he now carry out his campaign commitments to Americans that he made in the heat of the election campaign, while trying to understand the intricacies of running the Presidency?
My assessment: he will implement what he said he will do (with some tweaks of course). Why will he do that? Just think – in corporate management, we commit to do something and we will have to do it, come what may. Trump is a corporate businessman, running many businesses. When he commits something, he will have to do it, and he will do it – unlike the career politician who is afraid of political backlash. Trump has nothing to fear, he is not from Washington, he is least bothered with back room dealings at the Congress.
This would just mean that he will actually go and do what he said he will do – and, he said those things many times over and over again, and he was consistent, and that is one of the main reasons why he won the election. There is no sugar-coating, there is no “being nice and gentlemanly”, no diplomacy, no niceties with Trump. And, Middle Class America liked what it saw in him – he repeatedly demonstrated it in all his campaign speeches and messages.
Dangerous, right?
Not really.
The U.S. economy is huge and resilient and depends on a global network of buyers and suppliers for its success, and continued growth. President Trump will soon realize it. While he may not sign any new trade agreements, and threaten to walk out of existing agreements, he will be told by the Congress that international obligations cannot be violated. Trump might give some headaches and nightmares, but at the end he is not stupid. He will adjust himself while the world will struggle to adjust itself for a wild run with President Trump over the next four years. But he will push for retaining American jobs in America, and no country will be immune to that pursuit. And, I believe nothing is wrong with the jobs focus, as eventually a well-paid American in the U.S. is going to want to buy things from all over the world. Unless, I am missing something. Disclosure: I am not an economist by training!
I plan to write a separate piece on immigration matters, but on trade matters I think the world should expect a roller coaster ride for most of 2017. And, contingency plans will have to be ready. Currencies will be hurt seriously (see what happened to the Mexican Peso after the Trump win). Immigration will also be hurt.
Wiser counsel will eventually prevail, and there might have to be some serious compromises stuck.
In the meanwhile, brace yourself for a wild, wild ride. This is the world of “new protectionism”.
Cheers,
Vijay Srinivasan
20th November 2016
Capitalists in Poor Countries
Well, we are back at this fabulously greedy topic, aren’t we after a while?
There are many poor countries in the world, India being one with a per capita income of USD 1,581 as per World Bank data. This is GDP per capita and on the basis of purchasing power parity, India’s per capita income is estimated to be USD 6,088. On both measures, India ranks below more than 100 other nations. So, it is reasonable to assume that India is one of the poorer countries, though the GDP is growing at over 7% currently (the fastest for any of the largest 10 economies of the world).
One can argue that these low figures would have been even lower had the socialist policies of the erstwhile Congress governments continued to be in place. That would probably be true, but then the Congress government changed its long standing socialist philosophy in 1991 when India encountered an unprecedented balance of payments crisis. For the past quarter century or so, successive governments have improved their focus on economic development (though not at the pace required, and definitely not at the speed at which Communist China was able to pursue economic growth). Hence, it is also reasonable to say that India shifted surely and steadily towards a Capitalist model of economic growth, in simple terms. It was actually more complex than what I am stating here, but then we wish to understand the essential truth rather than analyze voluminous economics data.
So, we have now arrived at an inflection point in the GDP growth curve. In the process of the rapid growth over the past several years, India managed to create scores of billionaires, and Capitalism was no longer a bad word in the Indian lexicon. Startups mushroomed in Bangalore, Hyderabad, Chennai and Gurgaon. Venture Capital Funds flocked to India. The India IT Story was going great guns. More jobs were getting created. And what not?
However, one sad thing is the ignorance of our Capitalists on how to behave and live in one of the poorest countries on earth, and how to contribute to the less fortunate in society. In essence, it was a required tenet that Capitalists anywhere on the planet who have made billions for themselves need to become real philanthropists to aid society in ways more than just creating some jobs in the economy. Their role does not stop with just creating a few thousand jobs. And, they are not supposed to flaunt their wealth by building skyscraper homes in the midst of slums. Just look at the top few billionaires in the world, mostly in U.S. and Europe – they are all philanthropists and do not flaunt their wealth. They get engaged in issues which afflict societies all around the world – in Africa, in India, in South America, etc., They apply their minds to solving some of the biggest problems facing humanity.
What about Indian billionaires?
Except for one or two, you don’t hear from the rest on what they are doing towards alleviating poverty, improving water supply, providing power to villages, enhancing availability of quality education, etc., And, surely none seem to be heeding the advice of the Indian Prime Minister on moderation in everything. Nobody is even questioning the generation of wealth by these Capitalists (though there is enough talk on how it was done with the help of greedy government officials in most cases, but not all), or creation of jobs. What is sincerely needed is their application of mind to resolving some of the most intransigent challenges faced by India and its poor people who live below the poverty line.
Now it gets interesting. India moved away from Socialism to Capitalism sometime in the early to mid Nineties. Is it time for India to revisit Socialism (as Bernie Sanders tried to do in the recent U.S. Presidential Election Campaign)? Is it important for the Indian Government to become more interventionist than it actually already is? Is its pleading for Corporate Social Responsibility falling on deaf Corporate ears of the Capitalist oligarchy? Is it critical at all for the government to be involved in any kind of business?
Well, history is not a predicator of what is to come. With Social Media, the population (at least the younger ones which India does not lack in very good numbers) is “always” connected, and the injustices in society are being discussed more aggressively than in the past. The discussion is also different this time as it is not the corporate cookies afraid of losing their jobs who are talking in hushed tones. It is really the teenagers and the early twenty somethings who are very confident of their future, who are engaged in these conversations.
All these things presage a good development for India – if there is one country which can pull together its young people power into productive causes, it would be the Indian New Age Capitalists a.k.a. Startup Ventures. Such initiatives would eventually wrest control from the traditional oligarchs by implementing suitable business model innovations.
Interesting, right? Let us see what happens in the near future.
Cheers,
Vijay Srinivasan
6th November 2016
